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Captive Insurance

Captive Insurance

For those wishing to protect their captive, we’ll get you compliant.
And for those facing an audit, we’ll be your defense.

Businesses have been creating captive insurance companies (CICs) for more than 100 years in order to manage risk while taking advantage of the tax benefits offered by the insurance arrangement.

However, the IRS has started to evaluate possible abuses surrounding CICs, and has begun examinations in the area. For those businesses who are unprepared when facing examination, there can be consequences.

alliantNational leverages its years of experience with protecting taxpayers to help its clients navigate the complex world of captive insurance compliance, with its team of former high-ranking IRS executives, key congressional personnel and experienced litigators ensuring that each client has the strongest defense possible in the event of an audit.

Doing What's Best For You or Your Client

Doing What's Best For You
or Your Client

Whether You Are a CPA...

If your client has a captive, you need to evaluate whether they are compliant or not. The IRS is looking at business owners with captives, as well as the CPAs and financial advisors that serve them.

Let us help you and your client.

Or a Business Owner...

It doesn’t matter if you’re under audit or not, making sure your captive is compliant should be top priority.

alliantNational can help lower the risk of the IRS cracking down on your insurance arrangement, and will dramatically improve your case against the agency if you are audited.

What is a Captive Insurance Company?

Insurance costs can be a big problem for successful companies. Oftentimes a company may find that third party insurance is commercially unavailable or the commercial insurance that is available may be overly expensive. A company can put up its own capital to form a wholly owned subsidiary insurance company to solve these problems. These types of subsidiaries are known as captive insurance companies.

Captive insurance companies can not only fill in gaps in existing coverage but they also provide deductibles on existing coverage. Contributions to the captive insurance company can also be tax deductions under Internal Revenue Code section 831(b). Captive insurance companies also provide pricing stability and program control.

Captive Insurance Company Formation

Forming a captive insurance company requires careful planning and coordination. The primary steps involve:

  • Choosing Captive Structure – There are several types of captive structures, including single parent (pure) captive, association captive, agency captive, and segregated cell captive. A company should carefully choose the optimal structure.
  • Feasibility Study – A feasibility study is used to determine whether forming a captive insurance company would be possible. Depending on the jurisdiction, a feasibility study may be a required.
  • Tax Opinion – Tax implications should always be a concern and it is valuable to receive a tax opinion from a CPA or attorney to find out what those implications may be beforehand.
  • Select a Domicile – It is important to choose the best state or country where the captive insurance company will be created. Each domicile option is different and the taxes, fees, minimum capital required, and examinations required vary.
  • Prepare and Submit Captive Application

The IRS has only increased its scrutiny when handling captives. It’s an honor to use my experience with the agency to help businesses navigate the complex nature of captives.

– Steven Miller, Former IRS Acting Commissioner, alliantgroup National Director of Tax

Captive Insurance and the IRS

The IRS continues to heavily scrutinize captive insurance arrangements. Certain captive insurance types have consistently appeared, including in 2019, on the IRS’s “Dirty Dozen” list of tax scams to avoid. Micro-captives in particular have been identified as potential vehicles for illegal tax shelters and the IRS is keen to crack down.

If the IRS believes that a captive insurance company is claiming deductions for non-insurance activities they will litigate. This includes going after captive insurance companies that are claiming unreasonable premium deductions. If the captive insurance company cannot show that they are distributing risk, selling insurance, shifting risk, or whether transactions involved insurance risk then that captive could be a target for the IRS.

We'll Get You Compliant

If you or your client wants to protect their CIC, the time to become compliant is now.

alliantNational’s team of experts helps with:

  • Risk Pool and UTP Review
  • FIN 48 Analyses
  • Review and Preparation of Concern Areas
  • Review and Analysis of Foreign Bank Report Filings
  • Substantiation and Documentation Assistance
  • Substantiation and Documentation Assistance
  • Compliance Review

We'll Be Your Defense

Already under audit? alliantNational will help you or your client avoid consequences from the IRS, including understatement and negligence penalties, as well as the potential unwinding of the captive formation and subsequent loss of benefits.

The time to act is now, and alliantNational can help defend your interests with:

  • Audit Defense
  • Substantiation and Documentation Assistance
  • Risk Assessment of Your Captive

Have A Captive? Let's Talk

Take advantage of a free consultation to see how our team of experts can help.

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